Griffon(US:GFF)2021-08-01 10:15Financial Data and Key Metrics Changes - Revenue increased by 2% year-over-year to $647 million, or 4% when excluding the SEG divestiture [5][18] - Adjusted EBITDA decreased by 7% to $65 million, while adjusted EBITDA margins increased by 100 basis points to 10% [18] - GAAP net income was $17 million, or $0.31 per share, compared to $22 million, or $0.50 per share in the prior year [21] - Adjusted net income was $23 million, or $0.43 per share, compared to $26 million, or $0.59 per share in the prior year [21] - Cash and equivalents stood at $221 million, with net debt of $835 million and leverage of 2.9 times, marking a 1.5 turn improvement from the prior year [15][23] Business Line Data and Key Metrics Changes - In the Consumer Professional Products (CPP) segment, robust demand was noted, although shipping delays impacted US revenue and EBITDA [11] - The Home and Building Products (HBP) segment saw strong demand for residential and commercial door products, with sales increasing due to higher volume and favorable pricing [12] - Defense Electronics revenue decreased due to reduced volume from timing of deliveries, but EBITDA increased due to reduced operating expenses [13] Market Data and Key Metrics Changes - Backlog increased to $375 million from $341 million year-over-year, with a trailing 12-month book-to-bill ratio of 1.1 times [14] - The housing market and consumer spending remained strong, supporting demand across product categories [6][25] Company Strategy and Development Direction - The AMES strategic initiative aims to consolidate operations, increase automation, and support e-commerce growth, expected to improve margins by the end of 2023 [8] - The company anticipates annual cash savings of $30 million to $35 million and inventory reductions of the same magnitude from the AMES initiative [9] - The company is focused on improving margins and capitalizing on acquisition opportunities while maintaining a strong balance sheet [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand trends across all segments despite challenges from cost inflation and supply chain disruptions [26][25] - The company is closely monitoring the COVID-19 Delta variant and adjusting operations as necessary to ensure employee safety [10] - Management reiterated full-year guidance, expecting over $2.5 billion in revenue and $320 million in adjusted EBITDA [25] Other Important Information - The company declared a quarterly dividend of $0.08 per share, marking the 40th consecutive quarterly dividend [16] - The company has generated $212 million in free cash flow over the past three years and reduced leverage significantly [28] Q&A Session Summary Question: Raw material and transportation headwinds - Management acknowledged the impact of rising raw material costs and transportation delays, indicating a lag in passing through price increases [34][35] Question: M&A environment and capital allocation - Management noted that while capital is abundant, competition has driven up asset prices, and they are focused on improving existing operations rather than rushing into acquisitions [37][39] Question: Demand trends in DIY products - Management reported strong backlog levels, indicating continued demand despite signs of slowing in DIY products [43] Question: New product launches in HBP segment - New product launches in the HBP segment have been well received, contributing positively to sales [44] Question: Shipping delays and backlog - Management confirmed that shipping delays have pushed some revenue to later dates but demand remains strong across segments [51][52] Question: Pricing strength in HBP segment - Pricing strength in the HBP segment was attributed to passing through rising input costs and a favorable product mix [56] Question: Commercial growth in HBP - Management indicated strong growth in the commercial side of the HBP business, with expectations for further growth if an infrastructure bill is passed [62][63]